THE MIDDLE DONOR. A Research Document Compiled by Barefoot Creative

Transcription

1 THE MIDDLE DONOR A Research Document Compiled by Barefoot Creative In partnership with Canadian Mennonite University, the Barefoot Conference and Mike Tennant

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3 The Middle Child The middle born often has the sense of not belonging. Sometimes a middle child feels out of place because they are not overachievers and like to go with the flow of things. They really don t like to latch on to a person in a relationship; therefore they have trouble keeping one due to lack of interest. Not liking to take the limelight for anything, they are not overachievers. Relationships are not of high importance to a middle child, often times they are alone.

4 SECTION 1 OVERVIEW

5 THE MIDDLE DONOR 5 BE COURAGEOUS, GO OUT THERE AND DO IT, O Brien said of a middle donor program. O Brien noted a great way to foster middle donors is via non-probing love calls, where volunteers, typically older and female, just call up donors and love on you. Lori O Brien, senior vice president of direct marketing at St. Jude When we first launched the call for participation in a middle donor investigation, many agencies and organizations indicated interest. In our experience with multiple clients we had seen many opportunities for increased revenue development when middle donors were approached with a distinct strategy. We wanted to discover what other organizations had experienced. As we prepared for a full research project, we discovered that, while organizations were very interested in understanding middle donors, few had the data available to engage in research. We also discovered that most organizations did not treat middle donors with any significantly different strategies. Few could even identify a segment category. Most organizations slipped middle donors into the mass donor treatment or added them to major donor portfolios. Some had them balanced precariously in both segments. Rather than abandoning the project, even though it is slightly ahead of the curve in terms of non-profit experience, we decided to continue the conversations we started. As we spoke to leaders in donor relationships, we confirmed our belief that non-profit organizations face many challenges: 1. Increased competition 2. Negative public image of non-profits causing wariness in donors 3. High cost of fundraising 4. Data integrity Therefore, while we were unable to substantiate a statistically relevant data file on middle donors, we want to share some of the broad strokes that inform us. We look forward to doing this study again in 5 years to explore organizational change and new donor relationship strategies. In the meantime, we would like to share our experience with you, helping you understand the importance of this largely undefined and misunderstood group.

6 6 THE MIDDLE DONOR THE FALLACY OF THE DONOR PYRAMID All fundraising professionals quickly identify the donor pyramid. The base of the pyramid is founded on the strength of mass donors. In most organizations they represent the greatest number of donors, but contribute the least amount per individual annual donation. As the pyramid reaches its peak, the numbers of donors grow smaller and smaller and their gifts grow larger and larger. Ideally, there is a gentle tapering off of donors to the most committed major donor. At the very pinnacle of the traditional donor pyramid is the much-needed bequest and planned giving donor. This simple illustration has often been used to define the ideal donor segments for non-profit organizations. But few organizations have a neatly defined pyramid. Interestingly, the movement of donors is not as linear as the traditional triangle predicts. The most likely candidates for bequest and legacy gifts are actually the mid-level segment. While they may never have significant major cash gifts in their lifetime, they are able to leave a legacy gift when they are able to disperse their life assets. I think Canada s population is increasing; people need to get over the idea that you have to be a millionaire to make a gift. I don t think it s increasingly competitive, I think it is increasingly noisy... we all have to make a really good case for the relevancy to the individual for supporting our organization, the real thing I worry about is people getting too much practise at saying no, because of how much is asked of/from them. Survey Participant

7 THE MIDDLE DONOR 7 Mass marketing teams and major donor development officers... genuinely dislike one another. The high-dollar people see the direct marketers as the used-car salesmen of fundraising, and the direct marketers see the high-dollar people as snobs who, if you re not worth millions of dollars, YOU RE NOT WORTH MY TIME. Mark Rover, Sea Change Strategies CASE STUDY The client s challenge: Our development team is committed to a major gift donor development mindset. Our overall strategy is to build healthy personal relationships with all donors who gave $100 or more annually. In order to accomplish this, we have developed a strong portfolio program and each of our donor development officers is responsible for building a relationship with donors who have been added to their portfolio. We do not interrupt that relationship with direct mail or unnecessary communication from the organization. The client challenged Barefoot: To build an active donor list through direct mail in order to increase overall revenue. How it played out: The client held a large house list of lapsed, dormant and non-giving names. The cultivation strategy was really an acquisition strategy. While the list performed at +3%, the client was frustrated at the low results when compared to average mail results. By moving donors who gave $100 or more as a single gift into a portfolio, the cultivation list contained very few active donors. The median gift to this organization was $100. By moving all donors into portfolio accounts, the organization did not have a house list to cultivate. Unfortunately, the $100 donors fell far below the portfolio managers interest and were all but ignored. The client s in-house strategies were effectively choking their cultivation plan.

8 8 THE MIDDLE DONOR THE DONOR GAP The traditional donor triangle represents a large group of mass donors at the bottom of the triangle who make up a large number of donors, but a small amount in overall donations. Traditionally, the apex of the triangle is legacy or planned giving donors. Middle donors fall neatly into the centre of the triangle. The hour glass reflects many organizations actual donor model. The donor gap is the result of a lack of a strategic place to develop middle donors. The gap between major donor development and mass donor activities is one of the biggest hindrances to effectively building a middle donor cultivation plan. The ownership of the budget in silo-oriented organizations resists aggressive segmentation. The mindset of the two fundraising professionals is counter-productive to overall growth of the middle donor segment. Major donor development is focused on building relationships with individuals and is influenced by very specific requirements of the specific major donor. Mass donor strategies are built from intelligence gathered from data and trends. Middle donors fall in between the two. Many prefer mail and phone strategies to personal engagement. When the donor file has a large monthly donor presence, the donor development team has to take care not to confuse monthly donors with middle donors.

9 THE MIDDLE DONOR 9 SILOS While many fundraising specialists affirm movement from the lower regions of the donor pyramid up to the top, in most organizations this is just a theory. In organizations that have distinct fundraising specialists working with direct response activities with mass donors and a major gift donor group, conversations between the two rarely occur. While the theory of donor movement is simple, the actual process is challenging. The hierarchy within an organization is one indicator to help understand the organization s ability to navigate donor growth passageways. The vice president of direct marketing and mass donors is hesitant to share their list with the vice president of development if it means they will have to share their list, their budget and their revenue numbers. Volunteer coordinators protect potential donors from the marketing team. Major donor development officers are looking to build relationships with higher level mass donors in order to build their portfolios and reach their goals. Too often the silos forget that they are playing for the same team. In many cases the direct response team can inspire middle and major donors through mail or digital campaigns. In the best case scenarios the teams work together, building off of the relationships developed. There are many creative ways that the teams can contribute to revenue growth. Middle donors may get trapped in the passageway. Intuitive data tracking and segmentation can help nurture donor relationships, understanding the potential giving of a specific donor.

10 SECTION 2 DEFINING MIDDLE DONORS

11 THE MIDDLE DONOR 11 Defining major, middle and mass donors is a very difficult task. Organizations vary in size and offer strategies. The definition of middle donors varies greatly. Monthly donor strategies add to the complexity of the overall strategy. One of the questions we constantly challenge ourselves with as we study a variety of donor files is Who are the middle donors? Is the traditional donor pyramid an effective model for donor development? We recognize the power of the organizational offer to pre-determine levels of giving. For instance, organizations with a strong, but low, monthly gift offer may have donors who have the potential to give larger gifts, giving at mass levels because that is what they think the organization wants. On the other hand, some organizations will miss the middle level donor because they do not think their small contributions are effective. In understanding growing relationships with donors, we want to be cognizant of the capacity of our donors. The donor triangle intimates that donors have the capacity to grow into larger gifts. While some donors do have that capacity, not all do. Many donors give out of generosity and personal values. They are giving sacrificially. These donors have excellent potential for planned gifts and bequests, but may not grow to increased annual giving levels.

12 12 THE MIDDLE DONOR The greatest danger for organizations is to define middle donors by contributions rather than frequency and most recent gift. Middle donors, in our estimation, are donors who give larger gifts at one time, rather than small gifts that accumulate into a higher level donor. Donors who give many times during the year in smaller amounts do not perform the same as middle donors. Many organizations define middle donors as donors who give between $500 and $5000 annually. A donor who responds to 13 direct mail appeals annually with a gift of $150 gives $1950 annually, well within the definition of middle donors. Our experience indicates that this performance is that of a mass donor who responds to immediate need with an immediate gift. Middle donors are more deliberate and often respond seasonally or on a personal calendar. When defining middle donors in your organization, use your unique donor characteristics, communication and development strategies to segment this valuable group of donors.

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14 SECTION 3 ENGAGING MIDDLE DONORS

15 THE MIDDLE DONOR 15 Present economies and increased ability to segment are pushing organizations to maximize the value of their house list, although strategies vary widely. In our series of interviews and current client experience, organizational engagement strategies vary from 4 to 28 encounters annually. This includes offers, affirmations and organizational information (like magazines and updates). The trend we observe is that organizations with a stronger engagement strategy are more likely to have a larger middle donor group. While organizations continue to engage through traditional mail, many are starting to augment mail with e-encounters. Currently, there is little research in understanding the giving patterns of donors who have moved from mail to e-encounters. Organizations with a lower number of engagement activities have a high major donor emphasis and the mass donors struggle to participate. The middle donors are often absorbed into either the mass or major gift donor strategy. Because of aggressive strategies of growth, many organizations are forcing middle donors into major donor groupings. While this is done to increase the overall engagement of the donor, ironically it may reduce their annual contributions. Most portfolio officers are reticent to spend the time they need developing low level donors. Organizations may consider mail or phone too invasive for larger donors and stop the mail. Studying donor results from current clients and by using the information from our interviews, our recommendation is that frequency to lower level donors, including middle donors, is extremely important. We would also recommend that middle donors be contacted less often, but asked for larger amounts. When identifying middle donors, the dollar value of single gifts and the frequency of the gift is important.

16 16 THE MIDDLE DONOR When organizations move a monthly or frequent mass donor who gives in smaller amounts but reaches the cumulative level into this group, they will reduce their annual giving revenue because the donor has not shown the aptitude or ability to give single gifts at higher levels. Organizations successful in major donor development may be sceptical of the value of the mass donor and resist their development because of the high cost per donor. This discounts the value of the middle and mass donor. It also makes the assumptions that major or middle donors discard mail and define it unilaterally as junk. While we are not suggesting that mail be the core strategy for large gift donors, we are suggesting that regular, systematic communication augments the relationship, building stronger and more faithful larger donors, especially middle donors. Organizations successful in mass donor development use direct mail and phone for a large part of their development program. They are successful in developing middle and major donors through a mix of mail, phone and visits.

17 THE MIDDLE DONOR 17 Our research and experience has taught us that middle donors can be defined more by their characteristics than by their giving amounts. The middle donor is someone who: 1. Gives larger gifts less often during the year. 2. Often gives at the same time every year or several times during the year. 3. Does not consider their gift worthy of accolades. 4. Resists visitation and face-to-face interaction. 5. Enjoys short phone calls, especially if they focus on updates and thanking them for their most recent gift. 6. Is willing to build a relationship with a person over the phone. 7. Does not want to give monthly or on pre-determined payment plans. 8. Unlike control oriented major donors, middle donors are willing to give to missional goals and rarely participate in personally attempting to impact the project. 9. Responds well to mail, especially when the mail is strongly emotive with the support of intellectual backing including graphs, figures and statistics. 10. May be an online donor, but is inspired and motivated to give through mail. MIDDLE DONORS DO WELL ON OUR CHRISTMAS GIFT CAMPAIGN lapsed middle and major donors responded double the regular file and gave an average gift that was much higher. Beth Jost Reimer, CBM Canada

18 SECTION 4 DATA

19 THE MIDDLE DONOR 19 Data collection and analysis remains a weakness for many non-profit organizations. While non-profits understand the importance of collecting data and many have instituted well defined data collecting processes, few take the time and energy needed in analysing their data regularly. I BELIEVE FUNDRAISING IS ALL ABOUT DONOR RELATIONSHIPS, I think we are about using data and direct response and mass marketing techniques but never losing sight of the fact that we need to maintain a 1 to 1 relationship with every donor. To treat every donor as appropriately as possible, given the fact that we know them, we know what makes their heart beat; in a lot of a ways it s about them knowing us and us knowing them. Survey Participant

20 SECTION 5 TREATMENT STRATEGIES FOR THE MIDDLE DONOR

21 THE MIDDLE DONOR 21 Kristin McCurry, National Director of Director Response, American Cancer Society, has developed the middle donor segment and has discovered a strong source of donations. Here are a few of her thoughts: MANY OF THE CHALLENGES BETWEEN THE MAJOR GIFTS AND THE DIRECT RESPONSE ARE STRUCTURAL. The integration between the two programs has not happened. But the decline of the economy has challenged non-profits to push their donor files. A STRONG MIDDLE DONOR PREVENTS DONORS FROM FALLING INTO THE GAP, which I define as the period of a relationship that they give a significant gift to a direct channel and before they give a major gift. They are taken out of DM and moved to Major gifts and then get no treatment at all. Middle donors are frequently the donors who lapse when they are often pulled out of all mail and the organization loses the wallet share of those donors. MIDDLE DONORS ARE FOUND MONEY. Simply moving the annual gift from 1% to 5% and identifying them as contacts for planned giving and major gifts will increase overall value. McCurry sees value in incremental development of the donor. Moving an individual from $500 annually to $10,000 is ambitious. Moving them from $500 to $2,500 over a period of 4 years is reachable.

22 SECTION 6 ROLE OF THE INTERNET

23 THE MIDDLE DONOR 23 THE WEB PLAYS OUT FOR US AS AN IMPORTANT PART OF OUR WORK but like many organizations we struggle with how to reach out through the web. So again, that is part of trying to create the magnet that intrigues people enough to bring them to us. Survey Participant Our research and conversations touched on digital activities, but few organizations were pursuing digital formats strategically. Most middle donors are not actively engaged in online activities. There are definitely exceptions. MEDA s experimental online microfinance activity illustrates how an engagement-oriented site draws donors back to the site time and time again, building activity that sustains growth. Many organizations are supplementing their mail programs with active fundraising. But in most cases, the is an HTML or PDF of the traditional mail. Few have invested in testing alternative methods for raising funds, with the notable exception of symbolic or holiday giving programs. Engagement on web-oriented activity continues to be an area where Barefoot feels there are many opportunities for growth. Currently, for the most part, we are seeing static brochure-like sites that are designed to inform, not engage. Engagement is more difficult and requires additional resources to be dedicated to the development of the web-based activities. We look forward to defining those areas of growth in the near future, exploring together with our clients and partners to discover the potential for e-encounters that grow donors relationships with the organization. This would include social media, web-based events and a foundational web site.

24 SECTION 7 CASE STUDIES

25 THE MIDDLE DONOR 25 The following case studies were shared with us during the interview process. In each case the test is brand new and the results have not yet been fully explored. We are including them in the study to inspire donor relationship teams to think about creatively exploring ways of communicating to middle donor segments, helping build stronger relationships. CASE 1 MIDDLE DONOR TEST (donors giving up to $1000 annually) Group 1: 5 annual campaigns: high touch, personal notes. If 0 gifts during the year, they will receive a year end mailing. Regular newsletters. Group 2: Personal solicitation only through phone or face-to-face. This study is just new. What we realized is that if someone made a significant donation of $1000, they may not get on the radar for future offers. We have just implemented this new strategy and are waiting for results. We have already seen some very good responses to our initial mailings. CASE 2 CULTIVATION STRATEGY FOR AN ORGANIZATION THAT IS FOCUSED ON MAIL STRATEGIES: 10 regular appeals 2 reports 1 emergency appeal 4 targeted to major donors This organization does not separate major or middle donors. It is possible for a major donor to receive 17 mailings in one year. The mail program is highly successful.

26 SECTION 8 CONCLUSION

27 THE MIDDLE DONOR 27 We enjoy the irony of titling the final statements of this report a conclusion, as there are few conclusive statements to be derived. But that said, let us encourage you to develop a middle donor segment with the following wisdom: 1. Do not expect a middle donor to respond like a major donor. The middle donor does not respond well to regular visits or personal interactions these activities make them feel pushed. 2. Middle donors are sensitive about what they can and cannot give. Their income is not unlimited and they are well aware that they do not have the capacity to give at high levels which they have self-defined. They do not want to be pressured to give more, but will give more when a project or offer inspires them. 3. Middle donors are compassionate, caring individuals who give what they can and are delighted by a personal thank you that is not invasive a simple note or a phone call is often enough. 4. Building relationships with middle donors is important, but the relationship should be based on your interest in them, not in their potential to give. 5. Middle donors are well-aware of their lack of power in influencing the program. They are not giving because they want power, they are giving out of a personal commitment to do what is possible. They need to be encouraged to see their contribution as valuable. 6. Middle donors do not respond to well-meaning plaques and trinkets. Although there are sectors that are exceptions: arts, health care (in some instances) and education are a few.

28 28 THE MIDDLE DONOR 7. Monthly donors should not be lumped in with middle donors they are not the same people. 8. Middle donors like mail but they respond better to thoughtful mail that includes intellectual stimulation in addition to high emotive response. They are willing to read a 4 page letter. 9. Middle donors like to give towards specific gifts. While they will respond to organizational and missional offers, they are more likely to give to specific projects or goals. 10. Middle donors are group oriented they understand that they are a part of a team of givers that make it possible to accomplish the project. 11. Middle donors are well-aware of their lack of power in influencing the program. They are not giving because they want power, they are giving out of a personal commitment to do what is possible. They need to be encouraged to see their contribution as valuable. 12. Middle donors are excellent prospects for bequest and legacy giving.

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